The kingdom's entrepreneurial sector remains small, despite an increasing number of start ups
Despite a growing number of start ups in Saudi Arabia, there are ‘not enough’ support organisations to cater to small companies, according to Wamda partner Walid Faza.
Speaking at the Riyadh edition of Wamda’s Mix N’ Mentor event, Faza said the kingdom’s start ups need more accelerators, mentorship programs and co-working spaces.
Wamda partner Fares Ghandour also added that while government support has increased towards start ups, more can be done to boost Saudi Arabia’s entrepreneurial ecosystem.
"As the region’s largest economy, we see great potential in Saudi Arabia - it is an attractive market for startups and corporations alike. Government support has increased, regulatory roadblocks are being stripped away, but much more can still be done to make it easier for the ecosystem to reach its full potential,” he said.
A new report by Wamda, in collaboration with OC&C Strategy Consultants and commissioned by Google, showed that SMEs make up a small part of the kingdom’s economic activity. They contribute about 20% of its GDP, despite Saudi Arabia having the largest market in the GCC in terms of population and consumer spend, according to the report titled “Tech Entrepreneurship Ecosystem in the Kingdom of Saudi Arabia.”
Unemployment among Saudi nationals is approximately 12.8%, with the youth, which make up about half of the kingdom’s 32 million population, now facing the challenge of an overcrowded public sector, the report said, which had traditionally been the main employer of university graduates.
While the report suggests the tech start up industry in particular can cater to the young demographic, it said the sector is a bigger consumer rather than creator of digital technologies, with the majority of startups in Saudi Arabia being Software as a Service (SaaS), e-commerce-oriented or offering deep technology solutions.
Yet despite having few significant exits valued at over $100 million, authorities in the kingdom have made progress in the form of a $1 billion ‘fund of funds’ alongside other financing programmes. In the past three years, Saudi Arabia has also seen a surge in start up accelerators and incubators for tech companies. So far, it has over 40 business incubators and accelerator programs.
“We are definitely seeing opportunities where regulators have paid attention to the sector itself. We are showing interest in terms of moving around regulations and ease of doing business,” said Nejoud Al Mulaik, director at Fintech Saudi.
Other common issues in the kingdom’s start up sector include raising angel investment, acquiring talent, as well as a lack of connection between government and licensing bodies, the report said.